Funding Innovators

The Aug. 20, 2012, issue of C&EN included multiple articles on technology commercialization and start-up entrepreneurs. Yet to my dismay, the magazine was devoid of any meaningful discussion regarding funding, today’s most difficult part of the start-up equation. I am all for enthusiasm, but enthusiasm should not overshadow the important issues that concern most innovators.

Since the beginning of the global financial crisis, investments in early-stage technology companies have dropped significantly. This year it is estimated that up to half of the remaining biotech venture capital funds will close their doors. What venture capital money that is left will only trickle into new start-ups. According to Ernst & Young’s 2012 Global Biotech Tech Report, this trend is likely to get worse.

What else is feeding the storm? Well in the world of biotechnology, big pharma has become so risk-averse that in order to secure any substantial product deal, biotechs are being required to demonstrate strong clinical data. And with all the consolidation that has occurred in the pharmaceutical industry, there are fewer partners to work with.

In addition to all this came government cuts to start-up businesses and more restrictive funding policies. For example, in 2009, the National Science Foundation incorporated a “financial viability” step in the granting process. This means that even if your development grant passes the science and commercialization viability steps, you can still be declined funding because you are not cash-rich.

If you are like me, you are probably trying hard to come up with solutions to get through all this. So what are they? Here are three: Universities step up in venture investing, big industry comes back to the “early stage” technology table, and government makes a concerted effort to understand the needs of start-up tech businesses.

Other solutions to the funding gap exist, and we need media help to vet them. If C&EN and other news outlets don’t discuss financing concerns, we may lose the enthusiasm that was so beautifully discussed in C&EN.